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#1258061 - 09/28/09 07:38 PM Re: Regulation Z changes - 10-01-09 David Dickinson
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OK
But what constitutes a renew versus a refinance??? You wouldn't be able to change the rate, right?? And our system assigns a new loan number so that would be a refinance, right?

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#1258064 - 09/28/09 07:40 PM Re: Regulation Z changes - 10-01-09 David Dickinson
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David:
ok, refinance vs renew issue here. My understanding is "renew" is very narrowly defined by regulators. Our FDIC regulators seem to look at 226.20 and say that it is a renewal only if it falls within the 5 renewal examples given in 226.20. So the classic example of renewing a 5 year note for another 5 years would be treated as a refinance not a renewal.
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#1258066 - 09/28/09 07:44 PM Re: Regulation Z changes - 10-01-09 David Dickinson
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I have a question that I am not sure has been addressed. When evaluating for a higher priced mortgage loan, if the borrower qualifies for the initial payment amount, but does not qualify for the highest payment they could have over the initial seven year period, I assume that you would have to send an adverse action letter turning them down for debt to income ratio. Does this sound correct?

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#1258069 - 09/28/09 07:48 PM Re: Regulation Z changes - 10-01-09 Burgess
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Between the lines
And what about my post on extend or modify, agree or disagree?
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#1258139 - 09/28/09 08:44 PM Re: Regulation Z changes - 10-01-09 SMQ, CRCM
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Laramie, WY. USA
I'm still interested in the answers to my questions above, but in the meantime, another has come up. Regarding servicing and posting payments as soon as they are received, you may drop a loan payment at the drive thru on Saturday, but our Mortgage Department is not open. Do our tellers need to indicate the date the payment was received by the bank, so the mtg dept can back date the payment on Monday, or does the fact that our mortgage department was not open on that date make that unnecessary? I can't find any reference to this in the reg or commentary.

Thanks,

Deb

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#1258147 - 09/28/09 08:51 PM Re: Regulation Z changes - 10-01-09 Wyogirl
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Sorry, but never mind on the payment question. I found a thread in the 85 page 'other' reg z post.

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#1258164 - 09/28/09 09:10 PM Re: Regulation Z changes - 10-01-09 Burgess
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Originally Posted By: burgess
David:
OK, refinance vs renew issue here. My understanding is "renew" is very narrowly defined by regulators. Our FDIC regulators seem to look at 226.20 and say that it is a renewal only if it falls within the 5 renewal examples given in 226.20. So the classic example of renewing a 5 year note for another 5 years would be treated as a refinance not a renewal.

Queen & Burgess:
Renewal vs. refinance is a legal issue. 226.20(a) states a refinance is a new obligation that satisfies/replaces/extinguishes a previous loan. (BTW, HMDA and RESPA say the same thing). If the "new" loan doesn't do this, it's not a refinancing (although there are a few exceptions).

Burgess: Your examiners are clearly in the wrong here. Those 5 things in Reg Z say "even if it is replaced, it's still not a refinancing".

We've discussed this issue several times here at BOL.
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#1258258 - 09/29/09 08:50 AM Re: Regulation Z changes - 10-01-09 David Dickinson
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Ok, i have a situation that i am concerned about.

I attended a seminar where one of the speakers provided a solution to doing balloon loans. Many of the small banks in my area are considering or have made the decision, based on the speakers' recommendation that the following would be in compliance, to go with the stated solution:


In the FED box of the note state, example: We are NOT required to refinance this loan, however, if a decision is made to refinance this loan, the rate will not exceed 9.0% during the first 7 years.

for example: a 3 year balloon, amortized over 180 months. Calculate the balloon, take the balloon and use the highest rate as stated in the note (9.0%), in this example - recalcuate using the remaining amortization schedule. (balloon amount x 9.% / 144)= it is understood that this would be the highest P&I payment.

My arguement - using the statement we are NOT...means we are stating we may not refinance the loan and in that case, the highest P&I payment would be the balloon. so, to me the balloon is just not possible.

Management at my bank also agrees with me - but i want to make sure we are not missing the opportunity to continue balloon loans less than 7 years.

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#1258287 - 09/29/09 12:29 PM Re: Regulation Z changes - 10-01-09 Tryin-2-Comply
rlcarey Online
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I agree, unless the conditions for refinancing the loan is totally under the control of the borrower, this is just a balloon loan - period.

I hope the speaker was an attorney and if he put this recommendation in writing, that he has plenty of errors and omissions insurance.
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#1258380 - 09/29/09 01:54 PM Re: Regulation Z changes - 10-01-09 rlcarey
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Tax Returns - we have never used the 4506T's and may start to as it seems the easiest way to verify for self employed - How long does it take to get the report once it is requested? Is there a cost involved?

Also, please tell me I'm right - the 10/01/09 chenges Do NOT apply to a second home just the primary.

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#1258393 - 09/29/09 02:02 PM Re: Regulation Z changes - 10-01-09 Jerseygirl
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Thanks for the response - no, he isn't an attorney - he is well known and I am really surprised that he stuck his neck out there for this.

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#1258403 - 09/29/09 02:09 PM Re: Regulation Z changes - 10-01-09 Jerseygirl
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[quote=Jerseygirl]Tax Returns - we have never used the 4506T's and may start to as it seems the easiest way to verify for self employed - How long does it take to get the report once it is requested? Is there a cost involved? We order ours through Informative Research. $17/joint report 24-48 hr turnaround time.

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#1258417 - 09/29/09 02:20 PM Re: Regulation Z changes - 10-01-09 Truffle Royale
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DAvid, I'm not following the conversation with you and Burgess...please help clarify this for me. Within the exceptions to "refinancing" in .20(a), the first one (not considering #2-reduction in rate/payment) refers to single pay loans...if the 5-year loan was not a single pay...then I would think it would be a refinance, not a "renewal".

(1) A renewal of a single payment obligation with no change in the original terms.
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#1258470 - 09/29/09 03:14 PM Re: Regulation Z changes - 10-01-09 SwimRobin
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Originally Posted By: SwimRobin
I have a question that I am not sure has been addressed. When evaluating for a higher priced mortgage loan, if the borrower qualifies for the initial payment amount, but does not qualify for the highest payment they could have over the initial seven year period, I assume that you would have to send an adverse action letter turning them down for debt to income ratio. Does this sound correct?


I did not notice that this questioned had been answered. Can anyone help?

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#1258497 - 09/29/09 04:00 PM Re: Regulation Z changes - 10-01-09 SwimRobin
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That would fit in the category of inability to pay unless you have other mitigating factors, so in and of itself, I would say you...you would decline the request.
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#1258550 - 09/29/09 04:37 PM Re: Regulation Z changes - 10-01-09 RR Joker
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What changes are you all making to the loan rates listed on your websites in order to accomodate the changes effective Thursday?

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#1258565 - 09/29/09 04:49 PM Re: Regulation Z changes - 10-01-09 P*Q
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Thankfully (at least so far) we don't list APR's on our website, or print ads, for that matter.
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#1258580 - 09/29/09 05:03 PM Re: Regulation Z changes - 10-01-09 RR Joker
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How will we disclose a payment stream on a construction loan that is interest only payments, based on the amount advanced? We will have 11 interest only payments followed by the final balloon payment in month 12. Our TIL states Interest on the amount of credit outstanding during the construction period will be paid monthly, followed by 1 $300,000.00 payment on specified date.

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#1258585 - 09/29/09 05:09 PM Re: Regulation Z changes - 10-01-09 Beth175
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I have a question regarding calculating repayment ability for an ARM Loan. If I have an ARM loan that is fixed for five years and I am calculating repayment ability do I use the payment amount or the maximum amount the payment can be repriced to?

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#1258622 - 09/29/09 05:42 PM Re: Regulation Z changes - 10-01-09 KYbanker20
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KYbanker - you would look to the highest payment given in the payment stream in the Fed Box for the first 84 months.

I have a question about the whole renewal/refinance issue- all the above posts have really confused me. Due to all the changes to Reg Z we are looking at changing how we handle balloon loans when they mature. We currently take a new app, give new disclosures, new note, etc- just like a new loan thus making all the changes applicable. We are currently looking to start doing modifications for those loans for change to rate, payment amount and maturity date - not a new obligation. I have read 226.20 and the commentary and am even more confused.

So I guess my question is - if we modify the terms and do not get a new note then we do not have to redisclose and all the waiting periods and HPML issues would go away on these loans? I really did think I understood all of it, but now I have no idea.
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#1258712 - 09/29/09 07:05 PM Re: Regulation Z changes - 10-01-09 MarieR
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Walden, what every happened to your HPML checklist. I REALLY could use it NOW!!! Andy, Michele....HELP!

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#1258715 - 09/29/09 07:11 PM Re: Regulation Z changes - 10-01-09 Truffle Royale
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Marie R, I hear you!! I just keep finding questions that relate to this fun. We do modifications and extensions at the end of our balloons. Thought I understood it, too, but I'm as confused as you are. Maybe someone will clarify it for us.

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#1258722 - 09/29/09 07:18 PM Re: Regulation Z changes - 10-01-09 4newt
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I'm finding no one who advertises rates on their websites! This is strange to me, it's an absolute in our market. I just don't know what to change.

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#1258765 - 09/29/09 07:55 PM Re: Regulation Z changes - 10-01-09 P*Q
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I logged into BOL to ask a question about renewing loans that mature and how the Higher Priced Mortgage Loan requirements apply. I happened across the post above from MarieR which is sort of my question. For mortgage loans that are maturing, if the bank modifies, amends prior to maturity, do the MDIA requirements apply? And, can the bank renew on substantially the same terms or would a balloon loan for example now qualify as a Higher Priced mortgage loan requiring the bank to reevaluate collateral, collect paystubs, tax returns, etc?

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#1258802 - 09/29/09 08:27 PM Re: Regulation Z changes - 10-01-09 drewella
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drewella, if you do a modification and do not have a new note, HPML does not apply. We are only doing this for our workout loans so as not to appear to be circumventing the regs.
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